Trading Strategies for Swing Trading and Daytrading

I thought I would start this thread as a centralised depositary for people's trading strategies. It will allow us to explicitly see described eachother's styles.

I used to primarily be an intraday trader but I am gradually converting to swingtrading, since I believe the profit potential there is better. With slightly bigger stop losses than a daytrader, a swingtrader has the opportunity to multiply his capital for much larger gains over the course of 2-5 days. Also, the market structure has changed, making for somewhat choppy intraday conditions, which are smoothed out over the course of days.

There are many successful published swingtraders out there, each with their own distinct styles. The main ones are: Tony Oz, Linda Raschke, Alan Farley, Toni Turner. Some of these published traders are intraday too.

Other published traders / teachers:
Money management: there is only one worth mentioning... Van Tharp ... I wrote a review of him in the Books section of this site

My personal style is evolving to enter Tony Oz set-ups (in particular his bottom fisher and skyscraper set-ups) on an intraday basis and swing them for 2-5 days if they pan out well by the close. You can read about his styles on stockjunkie.com. Like him, I feel that these set-ups (when entered with the intraday precision that only full-time traders have) offer a better reward:risk than anything else that I have seen. I think Tony Oz has some great approaches but, if they are not for you, I would highly recommend Alan Farley too. I rank Oz and Farley pretty equally, but my personality is more aligned with Tony's approaches.

I started my life as a trader trading intraday consolidation breakouts when they were in line with the futures ... I used 5min charts. In the beginning, this technique worked well but, as more and more traders started playing them, the style lost its power. My hit rate went from 70% to more like 40%, and my average profit per trade declined too. People ended up fading these breakouts, and also fading the fades, resulting in a pretty useless strategy.

I then evolved to trading liquid stocks intraday that made moves with the futures and/or their sectors. In the beginning, I thought I had found the panacea for my trading account... over time I found the technique to be less and less profitable.... the sector leaders moved too quickly for me (and when i got in the stocks were invariably 'held' fixed by the specialist / market makers). So I gravitated to the second tier stocks.... with lower floats, they often moved quickly... over time however, the specialists wised up and 2nd tier stock movements became more erratic, lower beta and overall less predictable.

Intraday trend hunting for non-index tracking stocks was my next technique... sometimes I find them (even these days), and when I do, I play them. However, this is of little use as a core strategy since there isn't a consistency in the oppotunities that arise.

Market ranges have contracted, strong intraday trends have become fewer, and market makers / specialists have wised up. I needed an approach that could operate independently of any of these drawbacks to intraday trading. Swingtrading seems to fit the bill. Don't get me wrong, I still daytrade when the occasional gift arises, but my volume and focus is now on the bigger timeframe: swingtrading.

As a full-timer, I can get in on swingtrades and control them with greater precision than people who swing trade coming back home from their work. I often have a couple of points advantage on them as a result of intraday entries, and I have much better risk control, since I got in earlier and can get out IMMEDIATELY the moment things go wrong.

Anyways, that was my 2 cents. Please feel free to post your strategies on this centralised forum. Also, please feel free to constructively criticise any of my comments or any comments of future contributors on this forum.

@candletrader
This thread is a great idea. Especially for me - I've started trading this style about 2 month ago. I have to say that I'm workuing part time, so I cand only trade 3 days a week. I started about 10 years ago with some stock picking contests and then as an investor. My timeframe got shorter and shorter - now I'm trying to concentrate on swing-trading (although in the last 2 month I did not hold trades overnight).

I started one or two threads about Bottomfisher and Skyscraper Setups but participation was very weak. I'd like to discuss specific setups after the trading day - Tony Oz often posts some trades like in http://www.elitetrader.com/vb/showthread.php?threadid=2765 - but the discussion is spread over about 10 different threads.

If you are interested, this would be great! You can also email me at newharry@gmx.at

I am a bottom fisher. I look for capitulatory selling and buy into that on the day the selling happens. Since bottom picking is so difficult, I tend to just get a sense of where it will likely bottom, and I pyramid into the position as it drops. This gives me the advantage of buying on the bid, and having the largest portion of my position on at the low. I try to avoid liquid stocks, and I am often over 5% of the daily volume in a stock that I call a bottom in. Daytraders are often in liquid stocks, and I don't want to compete/deal with them. I don't use standard stops b/c the lower a stock goes, the more oversold and better it is. I then scale out as it bounces.
Lately, I'm branching out into IPO trading again as I think that there aren't enough people involved in this sector yet.

Heres my strategy. If I think the market is going up, I go long. If I think the market is going down, I short. If I'm wrong I get out fast. If I'm right, I ride it as long as possible.I always enter on a rally or a pullback. I'm not being a smart a$$. That's actually it.

I am curious about your switch, just a month or two ago I remember you were doing very well, has the recent market movement been a rough stretch for you? Most traders do not make adjustments like this when they are killing it, and I sure hope you are ok.

I still trade sectors as what you described is exactly what I do, while there are a lot more I need to do (up the size, increase holding time when it trends, etc . . . ), I still think it is a valid strategy and can be the foundation of even swing trading strategies.

Vis-a-vis intraday trading, my profitability has diminished greatly this post-summer relative to last year's post-summer period. I thought things would get better after the summer doldrums, and they did for a while. I have done some swing trades and have made some great money, using stops not much bigger than those for intraday trades. My BEST EVER SINGLE TRADE was very recent and was a swingtrade (lasted just over a week) on ENE. I am finding swingtrading to be much more profitable for me than daytrading. ENE was a situation play. For a mechanical swingtrading approach, I haven't found anything with a better reward:risk ratio than Tony Oz's set-ups .... as a full-time trader, I can bail at precise times intraday should the Oz set-ups not work out... also I can run em to potentially huge gains should they pan out well to the close.

I still do take mercenary intraday positions but they are not my bread and butter anymore ... e.g I won't hesitate to short a Greenie induced dump on QQQ and I won't hesitate to scalp CPHD on an anthrax scare. But my bill payer will probably end up being Oz swingtrade set-ups.